Source : Canadian Press

by Gillian Livingston

TORONTO (CP) – The shares of CTV Inc., Canada's largest private broadcaster, jumped in heavy trading Tuesday as rumours circulated on Bay Street that the widely held company is a potential takeover target.

The Toronto-based TV network was among the most active issues on the Toronto Stock Exchange, and its stock gained 95 cents to close at $19.75 on heavy trading of more than one million shares, far above normal volumes.

Rumours of a takeover gained strength after Shaw Communications' annual report indicated the Calgary company has $160 million invested in publicly traded Canadian communications firms.

Investors speculated that part of those holdings may include shares of CTV, which remains less profitable than its competitors despite job cuts and other efficiency drives aimed at improving its bottom line and boosting its stock price.

Talk of a possible CTV takeover intensified earlier this year after Shaw put its media and broadcasting interests into a new public company, Corus Entertainment Corp., based in Toronto.

Industry watchers also suggest Winnipeg-based CanWest Global Communications may have an eye on CTV.

"I wouldn't be at all surprised if CanWest owned some (shares), and I wouldn't be at all surprised if Shaw-Corus owned some," said an industry analyst who didn't want to be named.

CTV spokesman Tom Curzon said the company doesn't comment on takeover rumours.

Takeover speculation has increased since early last year, when the Eaton family sold its 40.2 per cent stake. Now the company is widely held by institutional and retail investors.

With all the voting shares in the marketplace, CTV has become an easy target at a good price, the analyst said.

"The share price right now is very attractive – I have a buy on the stock," he said.

The company is likely being pressured by institutional investors to boost profits.

"Their (CTV's) margins are much lower than many others in the industry and should be able to be improved (in a takeover), so there should be the ability to bring synergies to bear," the analyst said.

Other companies could join a takeover battle, including printing and publishing firm Quebecor Inc., telecom company BCE Inc. and Power Corp., the financial and media giant controlled by Quebec financier Paul Desmarais.

"There is the potential for a takeover," the analyst said. "It's just that Canada's a small place, so basically anyone with any related business to the sector that has the money emerges as a potential acquirer."

CanWest would not say Tuesday whether it holds CTV shares or is interested in the company. Executives from Shaw or Corus couldn't be reached for comment.

The broadcasting industry has been consolidating, a major example being CanWest's and Shaw's deal – which took a year and a half to settle – to split the assets of Vancouver's WIC Western International Communications.

That agreement faces a federal regulatory hearing starting next April, and a ruling won't come down before summer.

Until that ruling is given by the Canadian Radio-television and Telecommunications Commission, it's unlikely either CanWest or Shaw would want to make any major moves that might jeopardize a favourable decision.

The rumours didn't favour Shaw and Corus in the market Tuesday. Shaw's B class shares fell $1.20 to $40.80 with 1.6 million shares traded and Corus's B shares were off $1 to $25. CanWest's A class shares were down 20 cents to $15.90.

Any deal to buy CTV would face CRTC scrutiny, and the regulator could tell any acquiring company to sell certain assets to keep the market competitive, said Ian Morrison, spokesman for Friends of Canadian Broadcasting.

Some suggest CanWest, which has TV stations across the country, would be forced to sell some if it bought CTV's national network. Corus, which has a national radio network and owns several specialty TV channels, would likely have to sell some of the channels.

But it's unlikely any company would take a run at CTV until the federal regulator gives its ruling on the broadcaster's acquisition earlier this year of NetStar Communications, the parent company of The Sports Network (TSN) and the Discovery Channel.

A hearing is scheduled for early December, which means a ruling will come out in February or March.

CTV beat out CanWest, which had also been trying to come to an agreement with ESPN, the big U.S. sports network that owns a chunk of NetStar.

But CTV already owns SportsNet, a regional sports channel, and the regulator may not let the company run both.

"The decision they make will be very important for CTV's future," Morrison said.

Morrison's organization wants the regulator to force CTV to sell one of the properties to make sure there's choice for viewers and a competitive market.

With all the rulings still to be made, "what you've got is a huge poker game going on," he said.

© Canadian Press